Local Government Contacts

Tuesday, March 24, 2009

Let's compare depressions

Walter Williams has a link to an incredible article describing the Great Depression's causes and parallels to today's fiscal insanity. This is a long article, and well worth the time.

snippet from end of article:

...All this raises many issues economists have long debated:Who or what should determine a nation’s supply of money? Why do governments so regularlymismanage it? What is the connection between fiscal and monetary policy?

Suffice it to say here that governments inflate because their appetite for revenueexceeds their willingness to tax or their ability to borrow. British economist John Maynard Keynes was an influential charlatan in many ways, but he nailed it when he wrote, “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” ...

...Today’s slow-motion dollar depreciation, with consumer prices rising at persistent butmere single-digit rates, is just a limited version of the same process.

Government spends, runs deficits and pays some of its bills through the inflation tax.

How long it can go on is a matter of speculation, but trillions in national debt and politicians whomake misers of drunken sailors and get elected by promising even more are not factors thatshould encourage us. I nflation is very much with us but it must end someday. A currency’svalue is not bottomless. Its erosion must cease either because government stops its recklessprinting or prints until it wrecks the money.

But surely, which way it concludes will depend in large measure on whether its victimscome to understand what it is and where it comes from. Meanwhile,our economy looks like a roller coaster because Congresses, Presidents and the agenciesthey’ve empowered never cease their monetary mischief. ...